Indian chemicals sector stands in the midst of transformative change: CII - KPMG report

Indian chemicals sector stands in the midst of transformative change: CII - KPMG report

Indian chemicals sector can take several strategic actions to further enhances its market, sustainability, and overall positive impact on the economy

  • By Pravin Prashant | January 22, 2024

The Indian chemicals sector stands in the midst of transformative change – having to innovate in a digital landscape and strengthening its manufacturing prowess to become a global hub, all the while contending with growing sustainability imperatives, states a joint knowledge report of CII and KPMG in India titled 'Chemicals value chain transition – addressing the impact of ESG, globalisation and innovation' at the 5th edition of CII Chemical Conference.

All these three aspects are challenges as well as opportunities, and in recent years, Indian chemical sector has positioned itself into one of the global leading producers occupying 6th place and with growth of ~9 per cent expected over next 5-10 years the future potential is bright.

A key driver for this growth, is the inherent increase in demand across multiple end user segments in India, be it automotive, electronics or consumer goods. These strong demand fundamentals, allied with initiatives like Make in India, and 100% FDI in the sector, positions the Indian chemical sector well to become an attractive manufacturing destination to serve domestic demand as well as global markets.

The shift towards sustainable products by consumers, is also driving focus on newer and greener products globally. This at one level provides avenues for green premiums in pricing and also with re-use and circularity in chemistry and supply-chain, enables efficient production and costing – paving the way more sustainable and profitable future.

Although, the Indian chemicals sector is adopting innovative and green technologies along with digitalisation in operations, there is need for a more comprehensive and integrated approach which leverages the academia-industry government helix to ensure the right blend of cutting-edge research, business economics and policy support in place so that the sector rejuvenates and stays relevant in the coming years.

Moreover, the Indian chemicals sector is a fast-growing sector with a high CAGR of 9 per cent. The sector exhibits several positive aspects that contribute to its overall strength and potential in terms of expansion and diversification making it a significant contributor to the nation’s economic development. However, the Indian chemicals sector can take several strategic actions to further enhances its market, sustainability, and overall positive impact on the economy.

Firstly, investing in research and development is highly crucial. The industry should allocate resources to innovate new processes, materials and technologies that align with global sustainability standards. Through fostering a continuous innovation, the sector can stay ahead of regulatory changes, stringent compliances, environmental concerns, and path a way to develop highvalue eco-friendly products.

Secondly, adopting digitalisation can significantly improve efficiency and operational excellence. Advanced technologies such as AI, IoT, Bigdata, etc., can optimize production processes, enhance supply chain management, and reduce resource consumption. Digitalisation along with concerted efforts towards sustainable practices like production of green chemicals, adoption of green manufacturing processes, minimisation of waste and emissions, and incorporation of circular economy principles can contribute towards better environmental standards, align with the global market trends and address the everchanging customer preferences.

Lastly, ensuring supply chain resilience. Chemical companies need to build a more resilient supply chain to protect themselves from small to large scale disruptions. Considering the fact that chemical sector relies heavily on the international trade, it become extremely important for chemical companies to build resilient supply chain.

While the chemicals industry starts their transition journey towards a sustainable approach, assistance from government in an appropriate form could expedite the transition. Provision of production linked financial incentives, subsidies and budget allocation for research and development, incentives for environmentally friendly practices, creation of public forums for collaboration across the industry are some of the ways the government bodies could assist the chemicals sector.


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